Housing Finance to stay in the Doldrums

According to the Reserve Bank of Australia (RBA) minutes from their latest policy meeting suggested that more interest cuts were on the cards following a lower than expected outlook for GDP over the next year or so.

Financing for housing is growing at its lowest level in almost 40 years as the Australian economy slows and people become more cautious about taking on more debt in the wake of the Global Financial Crisis of 2008.

Australian household debt levels are now higher than those of the United States prior to the onset of the GFC, according to a J P Morgan Banking Analyst, Scott Manning.

Banks have also tightened their lending criteria which will offset the interest rate reductions we have experienced over the past year and (hopefully) prevent another boom similar to 2006 in Perth, the consequences of which we have had to endure over the past five years in the form of a collapse in building approvals, and a 10% fall in the median price of established homes.

It seems caution is the key word to describe consumer sentiment and it seems we are in for an interesting and possibly, challenging couple of years as the Chinese economy slows, Europe continues to bumble along the bottom and in Australia unemployment edges up.

Stay tuned!